Carvana shares fell 14% following short-selling accusations

shares Carvana It fell 14.2% on Wednesday following short-seller accusations that the online retailer overstated earnings with the help of companies controlled by the family of CEO Ernie Garcia III.

Gotham City Research claimed on Wednesday that the online used car retailer, which entered Standard & Poor’s 500 Last month, it overstated its 2023-24 earnings by more than $1 billion, which is “far more reliant on related parties” linked to the family than previously disclosed.

To illustrate his point, the short seller published DriveTime Automotive Group, Inc.’s 2024 audited financial statements. and Bridgecrest Acceptance Corp. Both companies are owned by Ernest Garcia II, Carvana’s largest shareholder and father of the online retailer’s CEO.

CNBC has not independently verified the financial results, which Gotham said it obtained through the Freedom of Information Act.

In general, the company accuses Carvana’s profits of relying on DriveTime’s debt issuance, “toxic” loans and accounting, and accounting irregularities.

Carvana did not immediately respond for comment on the report from Gotham City Research, the latest in a series of short sellers who have targeted the company in recent years.

Hindenburg Research, which was dissolved last year, disclosed a bet against Carvana, alleging the online used car retailer’s turnaround was a “mirage” that was fueled by shaky loans and accounting manipulation.

Carvana shares have been on an unprecedented ride for the company since the bankruptcy scare around late 2022. The stock price jumped from less than $5 per share during that period to close Tuesday at more than $477 per share.

Carvana shares closed Wednesday at $410.04, down 14.2% — the company’s second-worst trading day in the past year.